The Economics of Health Care Delivery and Reform

Sanjay Yadla, MDDepartment of Neurological SurgeryGrand RoundsOctober 30, 2009

Economics of Health Care in the U.S.

OverviewWhat are the problems?What are the proposed solutions?Health Care ReformWhere should neurosurgeons stand?

Health Care in the U.S.

Primarily owned and operated by the private sectorHealth insurance is primarily provided by the private sector15% of the population is completely uninsured

Health Care in the U.S.

Access to Care is UnequalPoor Access is Linked to Poor QualityCare Delivery is InefficientA fragmented Health Insurance SystemInefficient Financing for Uninsured and UnderinsuredLack of positive incentives in benefit design and provider reimbursement

Health Insurance Status of Individuals <65 years, 2007

Percent of Americans Uninsured by Age

% of Uninsured is getting Worse (20% of those <65 years)

Jefferson Health System

4.8 Billion in Total Assets as of June ’08$614 million endowment (Villanova $330M, UPenn $5.3B, Harvard $26B)Medicare - 28.1% of net patient revenueIndependence Blue Cross – 27.3%, the largest commercial insurance carrier

Jefferson Health System

Founded in 1995: Main Line Health System and TJUH IncNonprofit entity under one corporate parentAlbert Einstein Healthcare Network, Frankford Health Care System, Magee Rehabilitation Hospital

Joseph T.Sebastianelli, President and CEO of JHS

Most Profitable Medical Equipment Companies

ProductsNet Income ’07 ($millions)

Company

LensCrafters and Pearle Vision,

Oakley, Ray-Ban

$775Luxottica Group

needles, syringes, surgical blades &

scalpels

$856Becton, Dickinson and Co.

Orthopedic Implants $987Stryker

ADVATE rAHF-PFM $1,707Baxter Int’l

world’s leading supplier of PPMs

$2,231Medtronic

Most Profitable Biotechnology and Drug Companies ‘07

Lipitor, Norvasc$8,209Pfizer

ProductsNet Income ’07 ($millions)

Company

Diovan, Lotrel$6,516Novartis AG

Lovenox, Plavix, Ambien

$8,288Sanofi-Aventis

Advair, Lamictal, Vaccines

$10,384GlaxoSmithKline

Remicade, Topamax,

Procrit, DePuy, Cordis

$10,576Johnson & Johnson

Where does Pharmaceutical Revenue Go?

Are We Getting Our Money’s Worth?

USA is 42nd in the world in life expectancyWHO: US Health Care system 37th in overall performanceWHO: US Health Care system 72nd in overall level of health (of 191)

National Health Expenditures as a Share of GDP, 1980-2040

Health Care Spending as a % of GDP

Out of Pocket Spending

Health Insurance Premiums vsOther Economic Indicators

Total Spending on Medicare/ Medicaid as a Share of GDP

Are We Getting Our Money’s Worth?

Are We Getting Our Money’s Worth?

On the other hand…

US is the leader in medical innovation by revenue, # of new drugs and devices introducedIn 2006, 82% of world R&D spending in biotechnologyWhat does GDP vs Life Expectancy mean?

Life Expectancy

Health care and institutionsAlso reflects personal behaviors:

DietExerciseSmokingCompliance with medical protocols

Low life expectancy primarily due to high mortality rates above age 50Cancer and CV disease responsible for 61% of deaths at age 45+Breast and Prostate Cancer - screening available, behavioral factors not dominant Outcome: death avoidance

Health Care in the U.S.

Primarily owned and operated by the private sectorHealth insurance is primarily provided by the private sector15% of the population incompletely uninsured

Administration Costs

Patients Needing Costly Services

10% of patients account for 70% of health care expendituresMultiple chronic conditions, many medications, frequent hospitalizationsMedicare beneficiaries with >5 chronic conditions = 76% of expenditures17x spending for those with no chronic conditions

Follow the Money — Controlling Expenditures by Improving Care for Patients Needing Costly ServicesPosted by NEJM • September 30th, 2009

Thomas Bodenheimer, M.D., M.P.H., and Rachel Berry-Millett, B.A.

Cost effectiveness of preventive medicine50 year-old female smoker, total cholesterol >240 (“high”), HDL<40 (“low”), untreated moderate hypertension11 percent chance of MI over 10 yrs$240,000 for every year of life saved (QALY)

All patients diagnosed with appendicitis from 2001 to 2005CIHI database and US NISPatients categorized by age, gender, insurance status, race, and socioeconomic statusOdds of perforation determined

Appendicitis:Consistent natural historySingle definitive treatment (appendectomy)Distinct negative outcome (perforation)No known biological predispositionStrong association between treatment delay and adverse outcome (perforation)

Access Problems because of Costs, 2004

Health Care in the U.S.

Access to Care is UnequalPoor Access is Linked to Poor QualityCare Delivery is InefficientA fragmented Health Insurance SystemInefficient Financing for Uninsured and UnderinsuredLack of positive incentives in benefit design and provider reimbursement

Health Care Reform

Health Care Reform Principles

Improved AccessImproved QualityGreater EquityGreater EfficiencyControl Costs

From Health Care Bill to Law

www.cbs.com

Senate Finance Committee “Baucus” Bill

America’s Healthy Future Act of ’09Does not include “public option”Does specify creation of healthcare cooperatives (non-profit, member-controlled)Creates individual mandate:

Penalty of up to $950/person, $3800/familySubsidies for low income families/individuals

Senate Finance Committee “Baucus” Bill

Individuals can buy insurance from an exchange in their statePremiums capped at 13% of incomeBasic services: hospitalization, maternity, newborn, chemotx, pediatric

Senate Finance Committee “Baucus” Bill

Forbids insurance restriction based on “pre-existing conditions”Tobacco use, age, family size, geography can influence premiumsExcise tax on “Cadillac” health plans$829 Billion over the next ten yearsBy 2019, <65 yrs, 83%->94% covered

AANS/CNS Response

Tippett (AANS)/Adelson (CNS)press release September 22‘seriously misses the mark’‘express disappointment in the process’

AANS/CNS Response

No protections to ensure patient choiceNo options for medical liability reformThe alternative co-op proposal may lead to a government-run planIgnores looming workforce shortages

Top Ten Baucus Campaign Contributors from 2005

Courtesy of the Philadelphia Historical Digital Image Library

For every thousand hacking at the leaves of evil, there is one striking at the root. – Henry David Thoreau

Innovations in Care: Care Management

Activities designed to assist patients and their support systems Manage medical conditions and related psychosocial problems more effectivelyEnhance the coordination of care, eliminate the duplication of services, and reducing the need for expensive medical services.Generally provided by a registered-nurse care manager, often working with a multidisciplinary team.

Care Management

Working with the patient,family, and the primary care physician to prepare a care plan Teaching patients and families about diseases and medicationsCoaching patients and families on how to respond to worsening symptoms in order to avoid ED visits and hospital admissions Tracking patients’ status over time Revising care plans as needed

Cost-Effectiveness of Certain Preventive Measures

8%100%606.6Total

19% 3% 15.4 Canada

13% 3% 20.9 Middle East, Africa

21% 5% 29.4 Latin Amer

14% 7% 43.1 Asia Pacific

-3% 10% 57.9 Japan

7%3%19.4Italy

3%3%20.0UK

3%5%30.7Germany

4%5%32.6France

6% 28% 171.7 Europe

9% 44% 268.3 USA

Growthvs

2005 % ofTotal

Value($Bn)

Pharmaceuticals World Market Share by Region (2006)

Public Health Care

MedicareMedicaidMilitary Health System / TRICAREState Children’s Health Insurance ProgramVeterans Health AdministrationIndian Health ServiceFederal Employees Health Benefits